Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323
• Hearing dates: 29 and 30 May 2014
• Decision date: 16 September 2014
• Before: Macfarlan JA at [1]; Meagher JA at [87]; Barrett JA at [104]

Decision

Order that the parties bring in proposed short minutes of order to give effect to these reasons for judgment, with supporting submissions, in accordance with the following timetable:

(1) The appellant within 14 days of the date of this judgment;

(2) The respondents within a further 14 days;

(3) Any reply by the appellant within a further 14 days.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACTS - construction and interpretation of contracts - appellant and respondents entered into written agreement whereby rights to certain temporary reserves were divided - whether royalties payable by appellant in respect of iron ore mined in defined area - whether ore mined by entities deriving title to relevant land through or under appellant - whether ore produced by appellant in association with others
• Legislation Cited: Mining Act 1904 (WA), ss 48, 276; Real Property Act 1900 (NSW), s 12A
• Cases Cited: Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11; 247 CLR 149; Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603; Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368; Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; Newey v Westpac Banking Corporation [2014] NSWCA 319; Roussel-Uclaf v GD Searle & Co Ltd (No 2) [1978] 1 Lloyd's Rep 225; Sahab Holdings Pty Ltd v Registrar-General (No 2) [2012] NSWCA 42; 16 BPR 30,353; Streller v Albury City Council [2013] NSWCA 348; Aust Torts Reports 82-146; Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; 169 CLR 332; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; 86 ALJR 1
• Texts Cited: Lewison and Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co)
• Category: Principal judgment
• Parties: Mount Bruce Mining Pty Ltd (Appellant); Wright Prospecting Pty Ltd (First Respondent); Hamersley Iron Pty Ltd (First Cross-Respondent); Hancock Prospecting Pty Ltd (Second Respondent)
• Representation: Counsel: N J Young QC/M J Darke/Q Rares (Appellant/First Cross-Respondent); A J Myers QC/K A Stern SC/K H Barrett/R J Hardcastle (First Respondent); N C Hutley SC/J C Giles (Second Respondent); Solicitors: Allens (Appellant/First Cross-Respondent); Clayton Utz (First Respondent); Horton Rhodes (Second Respondent)
• File Number(s): CA 2013/173153

Decision under appeal

• Jurisdiction: 9111
• Citation: Wright Prospecting Pty Ltd v Hamersley Iron Pty Limited [2013] NSWSC 536; Wright Prospecting Pty Ltd v Hamersley Iron Pty Limited (No 2) [2013] NSWSC 709
• Before: Hammerschlag J
• File Number(s): SC 2009/323345

HEADNOTE

[This headnote is not to be read as part of the judgment]

On 5 May 1970, the appellant ("MBM") entered into a written agreement with the respondents (together referred to as "Hanwright") concerning certain Temporary Reserves held by Hanwright in respect of land in the Pilbara region of Western Australia. Under Clause 2.2 of the agreement, MBM acquired from Hanwright "the entire rights" to identified Temporary Reserves which were together thereafter called the "MBM area". Clause 3 provided for the payment to Hanwright of royalties on ore won by MBM from the MBM area.

In these proceedings, Hanwright claimed that royalties were payable by MBM in respect of iron ore mined in two areas known as "Eastern Range" and "Channar". By judgment of 10 May 2013, Hammerschlag J upheld Hanwright's claim and entered judgment for Hanwright against MBM in the amount of $130,816,256.83.

Held (allowing the appeal in part):

Dismissing the appeal in relation to the "MBM area" issue:

1. The phrase "ore won from the MBM area" refers to ore won from a physical area of land. References to land and rights were references to two distinct concepts of which the agreement makes it plain that the parties were conscious. When specifying the royalty to be paid, the parties chose to refer to the former concept rather than the latter ([46]). By expanding the expression "Mount Bruce Temporary Reserves" to include rights, Clause 1.4 assumes the continued relevance of the earlier definition of the expression as a reference to areas of land ([43]-[44]).

2. Support for this reasoning is obtained from the parties' choice of the words "MBM area". In their ordinary meaning, the words refer to an area of land rather than rights with respect to that land. When parties define terms, they seldom use arbitrary labels ([47], [103]).

Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, considered.

Allowing the appeal in relation to the "through or under" issue:

1. Ore has not been mined in the relevant area of Channar by entities deriving title to the land "through or under" MBM. The meaning of the phrase "deriving title through or under" must be ascertained by reference to the text and context of the instrument ([55]). That phrase requires that there be a continuous or unbroken chain of title in respect of the relevant land between MBM and the present owner of mining rights over the subject land ([56], [59], [70]).

2. There is no unbroken chain of title over the relevant area of Channar linking the present owners, who are winning ore from it, to MBM ([63]). From 1974 to 1978, no relevant mining rights covered the area and the evidence does not indicate that there was any transaction between MBM and Hamersley Exploration that led to the latter acquiring its rights ([63]).

3. Even if the Channar Joint Venturers would not have acquired rights over the relevant land but for MBM's surrender of rights over other land, they did not derive title to it "through or under" MBM because at the relevant time (1988), MBM did not have any rights over that land to pass on ([67]).

Allowing the appeal in relation to the "in association with" issue:

1. Ore has not been produced by MBM from Channar "in association with" others. The words "in association with" do not remove the requirement that in some way the ore be produced by MBM ([74], [76], [82]). MBM was not a member of the partnership which produced iron ore in the period to 2012, nor was it involved in the management or organisation of that production process. It simply held a limited shareholding in the parent company of the nominee/agent of the partnership. It could not therefore be described as having itself produced any ore ([75]).

Judgment

1 MACFARLAN JA: This appeal relates to a claim by the respondents (together referred to as "Hanwright") against the appellant ("MBM") for royalties due under a written agreement dated 5 May 1970 ("the 1970 Agreement") to which Hanwright, MBM and Hamersley Iron Pty Ltd ("HI") were parties. The royalties are alleged to be payable by MBM in respect of its mining of iron ore in areas in the Pilbara region of Western Australia known as "Eastern Range" and "Channar".

2 By his judgment of 10 May 2013, Hammerschlag J upheld Hanwright's claim ([2013] NSWSC 536), resolving questions of construction of the 1970 Agreement in Hanwright's favour and subsequently entering judgment for Hanwright against MBM in the amount of $130,816,256.83 ([2013] NSWSC 709).

3 The issues on appeal are in essence as follows:

(1) The "MBM area" issue

Whether, in referring to ore won by MBM "from the MBM area" as defined in the 1970 Agreement, the Agreement was referring, as Hanwright contend, to an area of land to which rights of occupation which Hanwright transferred to MBM related, or whether it was referring to the rights themselves.

(2) The "through or under" issue

If the first issue is resolved in favour of Hanwright and on the agreed basis that MBM itself has not mined iron ore in Channar, whether ore has been mined there by entities deriving title to the relevant land "through or under" MBM. This is an expression which derives from a 1962 agreement ("the 1962 Agreement") which the parties to the proceedings agreed was in part incorporated by reference into the 1970 Agreement. Unlike the position in relation to Eastern Range, Hanwright need to succeed on this issue (or issue (3)) in order to succeed in their claim. Their claim relates only to an area of Channar in relation to which MBM has refused to pay royalties. For convenience, I shall refer to this area as Channar A, and to the remainder as Channar B.

(3) The "in association with" issue

Alternatively to (2), whether ore has been produced by MBM from Channar A "in association with" others. This expression again derives from the 1962 Agreement.

(4) The "extension of ore bodies" issue

This issue concerns the meaning of the reference to "extensions of ... ore bodies" in Clause 1.4 of the 1970 Agreement. It does not arise if the first issue above is resolved in favour of Hanwright.

4 The primary judge resolved issues (1), (2) and (3) in favour of Hanwright. For reasons given below, I agree that issue (1) should be resolved in favour of Hanwright but consider that issues (2) and (3) should be resolved against them. As a result, MBM's appeal should be allowed so far as it relates to Channar A but not so far as it relates to Eastern Range.

THE LEGISLATIVE CONTEXT

5 Section 276 of the Mining Act 1904 (WA) permitted the relevant Minister to reserve temporarily any Crown land from occupation and to authorise any person to occupy it temporarily on such terms as the Minister thought fit. In the period relevant to these proceedings the State of Western Australia entered into many agreements for the occupancy of such Temporary Reserves, with the agreements being approved by an individualised Act of Parliament. Section 48 of the Mining Act permitted the Governor to grant mining leases.

THE FACTUAL CIRCUMSTANCES

6 In 1961 and 1962, Hanwright were granted rights of occupancy over certain Temporary Reserves (the rights of occupancy themselves frequently being called "Temporary Reserves"). These became a subject of the 1962 Agreement but were unrelated to those Temporary Reserves the subject of the 1970 Agreement.

The 1962 Agreement

7 As noted above, the parties accepted that the 1970 Agreement was entered into against the background of, and in part expressly incorporated, the terms of the 1962 Agreement.

8 Recital (g) to the 1962 Agreement was in the following terms:

"It is intended that the Vendors [Hanwright] shall sell and the Purchaser [HI] shall purchase all the right title and interest of the Vendors and each of them in and to and in respect of the said Temporary Reserves [being those granted to Hanwright in 1961 and 1962] and the land comprised therein (hereinafter called 'the Temporary Reserve land') and all rights to prospect or mine granted thereby or flowing therefrom".

9 Other presently relevant provisions of the 1962 Agreement were as follows:

"1. The Vendors shall sell and the Purchaser shall purchase all the right title and interest of the Vendors in and to and in respect of the said Temporary Reserves and each of them and the land comprised therein and all rights to prospect or mine granted thereby or flowing therefrom.

...

9. As further consideration for the foregoing the Purchaser shall pay to the Vendors in respect of all iron ore produced by the Purchaser (whether operating alone or in association with or by licence to others[)] from the Temporary Reserve land and sold or otherwise disposed of by the Purchaser or by the Purchaser and such associate or by such licensee an amount equivalent to 2½% of the amount received on sale or other disposal of that iron ore in unrefined and unmanufactured form f.o.b. the first port of shipment thereof ...

...

19. In the event of the Purchaser selling or otherwise assigning its title to any area of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to Clauses 9, 14 or 15 hereof the Purchaser shall at its option either obtain from the buyer or assignee a covenant binding such buyer or assignee for himself or itself and his or its assigns and other successors in title with the Vendors to make payments to the Vendors in respect of that land in the terms of such one of those clauses as relate thereto or pay to the Vendors an amount equivalent to thirty-three and one-third percent of the Purchaser's nett profit on such sale after deducting all its expenditure on or in connection with the land concerned up to the date of sale ...

...

24. Except where the context otherwise requires:

...

(iii) The expression 'the Purchaser' shall (except in the case of a sale or assignment pursuant to Clause 19 hereof on the alternative basis therein provided whereby the Vendors become entitled to the alternative of thirty-three and one third percent of the Purchaser's nett profit on such sale) include its successors and assigns and all persons or corporations deriving title through or under the Purchaser to any areas of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to Clause 9, 14 or 15 hereof.

..."

The period 1967 to 1969

10 On 11 August 1967, Hanwright entered into an agreement with the Premier of Western Australia relating to the establishment by Hanwright of a joint venture to conduct mining investigations on land the subject of Temporary Reserves to be created by the Minister (the "1967 Hanwright State Agreement"). The agreement was approved by the Iron Ore (Hanwright) Agreement Act 1967, and on 21 March 1968 rights of occupancy over certain Temporary Reserves were granted to Hanwright as contemplated by the agreement.

11 On 31 January 1968, Hanwright and HI made a written agreement relating to those Temporary Reserves and providing for the formation of a company (MBM) to exploit them. The shareholdings in MBM were to be 75% HI and 25% Hanwright.

12 On 10 October 1969, the Temporary Reserves earlier issued to Hanwright were cancelled and Temporary Reserves that included TRs 4965H and 4966H were issued to them in accordance with a 1968 amendment of the 1967 Hanwright State Agreement. The 1968 amended agreement was approved by a further Act of Parliament.

The 1970 Agreement

13 Hanwright, HI (referred to as "Hamersley") and MBM entered into the 1970 Agreement on 5 May 1970. Presently relevant terms of that agreement were as follows:

"PREAMBLE

1.1 Hanwright hold Temporary Reserves in respect of areas indicated on the attached map (Appendix A) as the following numbered blocks :

4937H to 4967H inclusive

and that these blocks (hereinafter referred to as 'Mount Bruce Temporary Reserves') are subject to the exercise of an option by Mount Bruce Mining Pty. Limited.

1.2 There exists an agreement dated 31st January, 1968 between Hanwright and Hamersley whereby Hamersley may exercise an option over the Temporary Reserves.

1.3 By Clause 5 of the Iron Ore Hanwright Agreement Act Amendment Act 1968 M.B.M. may give notice to the State and Hanwright that it wishes to replace the Joint Venturers in respect to that agreement.

1.4 All references to blocks or reserves include all present and future rights of Hanwright in relation to the above blocks and reserves including any extensions of the ore bodies located therein or any adjustments of the present indicated boundaries of the above Temporary Reserves arranged with the Western Australian Government.

...

DIVISION OF MOUNT BRUCE RESERVES

2.1 Hamersley hereby relinquishes its option granted pursuant to the January 1968 agreement.

2.2 In consideration of this relinquishment and in consideration of the payment by M.B.M. to Hanwright of $A5 million payable as hereafter set out, Hanwright hereby agrees that its Mount Bruce Temporary Reserves should be divided between Hanwright and M.B.M. so that in respect of temporary reserves 4947H to 4962H inclusive (hereinafter called 'Hanwright area') the entire rights thereto are restored to Hanwright and in respect to temporary reserves 4937H to 4946H inclusive and 4963H to 4967H inclusive (together hereinafter called 'M.B.M. area'), M.B.M acquires the entire rights thereto.

2.3 Notwithstanding the foregoing at such time as the Mount Bruce Temporary Reserves are reduced to a mineral lease or leases pursuant to Clause 8 (1) (a) of the Iron Ore (Hanwright) Agreement of 1967 the total area of such lease or leases will be divided between M.B.M. and Hanwright in the proportion 75% M.B.M. 25% Hanwright. Hamersley will use its best endeavours to ensure that Hanwright is granted tenure over certain additional areas indicated by Hanwright in the areas around Mount Bruce.

3. ROYALTIES

3.1 Ore won by M.B.M. from the M.B.M. area will be subject to the payment to Hanwright of a base Royalty of 2½% on the same conditions as apply to the existing Agreement between Hanwright and Hamersley [that is, the 1962 Agreement] with the exception that L. S. Perron will be eliminated as a beneficiary. M.B.M. will execute such a Royalty Agreement. M.B.M.'s royalty statements to Hanwright will be subject to verification by an independent auditor on the basis set forth in Hamersley's letter dated 23rd December, 1969.

3.2 Ore won by M.B.M. from the M.B.M. area will be subject to the payment of a further royalty of 20 cents per ton on ore mined, payable until the total sum of $5 million has been paid and in the same manner as the base royalty.

4. EXISTING SECONDARY PROCESSING OBLIGATIONS

Hanwright and M.B.M. will seek the Minister's consent to vary the Iron Ore (Hanwright) Agreement Act Amendment Act 1968 pursuant to Clause 15 thereof so that M.B.M.'s right to give notice under Clause 5 (1) of that Agreement to take the place of the Joint Venturers shall be limited to notice in respect of blocks 4937H to 4946H inclusive and 4963H to 4967H inclusive and shall take over all secondary processing obligations under the Iron Ore (Hanwright) Agreement Act 1967 and the Iron Ore (Hanwright) Agreement Act Amendment Act 1968.

...

6. HANWRIGHT'S OPTION TO SELL IRON ORE TO HAMERSLEY

Hanwright shall have an option exercisable on or before 31st December, 1970 to enter into an Agreement with Hamersley for the sale of iron ore from the Hanwright area on the following terms and conditions.

...

6.12 BLENDING OF ORE

This option is conditional upon the Japanese Steel Mills agreeing to accept ore from the Hanwright area blended with ore produced by Hamersley from its areas. Hamersley will notify Hanwright by 31 May 1970 of any decision of the Japanese Steel Mills.

...

9. MARUBISHI REPRESENTATION

Hamersley agrees to release Marubishi from its undertaking not to represent any other company except Hamersley, so that Marubishi may be permitted to represent Hanwright for sale of ore mined from the Hanwright area.

10. GOVERNMENTAL APPROVAL

The implementation of these arrangements and the obligations involved by them on the part of Hanwright and on the part of Hamersley and M.B.M. are all subject to and conditional upon the necessary Governmental approvals and implementations being effected.

...

12. ENTIRE AGREEMENT

Subject to clause 10 above this agreement is intended to be binding and enforceable as from the date hereof and contains the entire agreement between the parties in relation to the Mount Bruce temporary reserves and supersedes all prior agreements or arrangements whether written or oral relating to these reserves providing however that the granting of approvals by the Minister will be deemed to be notice of intention to proceed as required by clause 2 of the January 1968 agreement but Hamersley agrees to continue the loan of $3.2 million to Hanwright until the commencement of mining of the M.B.M. area, whereupon Hanwright will repay the loan to Hamersley over a period of eight equal quarterly instalments".

14 Eastern Range is wholly within the area that was covered by TR 4967H and Channar is wholly within the area that was covered by TRs 4965H and 4966H. Each of these TRs are identified by Clause 2.2 of the 1970 Agreement as falling within the "MBM area".

Events subsequent to 1970

15 A description of the events subsequent to 1970 concerning Eastern Range is unnecessary as MBM accepts that if Clause 3.1 of the 1970 Agreement is properly construed as referring to the physical area covered by the relevant TRs (including TR 4967H within which Eastern Range falls), then it is obliged to pay the royalty claimed by Hanwright under that clause in respect of Eastern Range. This is the "MBM area" issue.

16 The position is otherwise in relation to Channar A as MBM contends that, even if the expression "the MBM area" in Clause 3.1 refers to the physical area covered by the relevant TRs (and therefore Channar A, being within TRs 4965H and 4966H, is encompassed by that expression), nevertheless, ore has not been, and is not being, "won by MBM" as required by that clause so as to trigger the obligation to pay royalties.

17 The post-1970 position in relation to Channar is described in detail at [38] to [54] of the primary judgment ([2013] NSWSC 536). The following description is sufficient for the purposes of this appeal.

18 On 30 August 1972, Hanwright wrote to the Minister for Mines surrendering their rights in respect of TRs 4965H and 4966H and the following day MBM applied for rights of occupancy over those TRs. These were granted on 18 April 1973, retrospective to 30 August 1972. MBM thus acquired TRs over the land covered by Hanwright's former TRs 4965H and 4966H, as contemplated by the 1970 Agreement.

19 On 17 October 1974, mining lease ("ML") 252SA was granted to MBM. That lease comprised 19 sections, with sections 18 and 19 covering part of the previous TRs 4965H and 4966H. Those TRs were cancelled on the same date.

20 No rights were granted in respect of that part of the former TRs 4965H and 4966H not covered by sections 18 and 19 (which I refer to as Channar A) until April 1978, although it is possible that rights of occupancy held by Dampier Mining Company Ltd for about a year from 25 February 1977 encroached to some extent on those areas. Dampier was not related to the parties to the present proceedings.

21 On 21 April 1978, Hamersley Exploration was granted TR 6663H which comprised the part of the former TR 4966H remaining after the grant of sections 18 and 19 of ML 252SA. On 2 May 1979, TRs 6982H and 6983H were granted to Hamersley Exploration. These covered parts of the previous TRs 4965H and 4966H. TRs 6663H, 6982H and 6983H were cancelled on 18 December 1982 after the grant to HI of a mineral lease (section 238 of ML 4SA) which covered part of the land previously covered by those TRs.

22 On 16 November 1987, CMIEC (Channar) Pty Ltd and Channar Mining Pty Limited (the "Channar Joint Venturers") entered into a joint venture agreement. The former was a subsidiary of China Metallurgical Import and Export Corporation and the latter was a wholly owned subsidiary of Hamersley Holdings Limited, a company to which MBM and HI were related. In March 1988, MBM surrendered sections 18 and 19 of ML 252SA and HI surrendered section 238 of ML 4SA, with the result that ML 265SA was granted to the Channar Joint Venturers on 8 May 1988.

23 MBM pays royalties to Hanwright in respect of ore won from the land that was formerly sections 18 and 19 of ML 252SA (which I have referred to as Channar B), apparently upon the basis that the mining rights in respect of that land derived ultimately from MBM's acquisition of TRs 4965H and 4966H from Hanwright under the 1970 Agreement. It has resisted payment of royalties in respect of the balance of the land (Channar A), which derives from Hamersley Exploration's acquisition of rights of occupancy in 1978 and 1979.

The Channar Joint Venture

24 The primary judge described the operations and structure of the Channar Joint Venture in the following manner. The accuracy of the description is, in part, disputed:

"52 On 17 June 1988 the Channar Joint Venturers granted a sublease of ML 265SA for a term ending on 31 December 2012 to Channar Investment Nominee Pty Ltd, a company which had been appointed to act as nominee and agent of a partnership which had been formed to mine the area. The Channar project has since been restructured pursuant to a Master Restructure Deed under which the partners have transferred their interests in the partnership assets to the Channar Joint Venturers who, on 31 December 2010, took over all operations and activities previously undertaken by the partnership. The sublease of ML 265SA formally expired in or around May 2012.

53 The Joint Venture is managed by Channar Investment Nominee, a wholly owned subsidiary of Channar Finance Ltd. Channar Finance Ltd is held as to 50% by Sinosteel, with the remaining 50% being held as to 12.5% by Hamersley Holdings, 12.5% by Hamersley Iron, 12.5% by MBM and 12.5% by Channar Mining Pty Ltd, all of which are subsidiaries of Hamersley Holdings and all of which hold the shares beneficially for Hamersley Holdings. ..."

THE JUDGMENT AT FIRST INSTANCE

The "MBM area" issue

25 The primary judge found that the "MBM area" referred to in Clause 3.1 of the 1970 Agreement was "the physical area indicated on the map attached to the 1970 Agreement as numbered blocks 4937H to 4946H and 4963H to 4967H" (Judgment [98]). His Honour regarded the references to "areas" in Clauses 1.1 and 2.3 as supportive of this view and Clauses 9 and 24(iii) of the 1962 Agreement as consistent with it.

26 As MBM was able to control what occurred in the area covered by its Temporary Reserves, his Honour regarded the conclusion that Clause 3.1 required MBM "to pay an amount based on the amount of ore won from any part of the area the entire rights to which were held by Hanwright and conveyed to MBM" as "commercially rational and sensible" (Judgment [107]).

27 Moreover, his Honour regarded the use of the term "royalty" in Clause 3.1 as apposite, or at least not inapposite. He noted that "[t]he right to mine (exercise of which attracts payment of the royalty) was not one which was to be granted by Hanwright. It was always to emanate from the State" (Judgment [109]).

The "through or under" issue

28 The primary judge referred at [121] to Roussel-Uclaf v GD Searle & Co Ltd (No 2) [1978] 1 Lloyd's Rep 225 at 231 as concluding that the expression "any person claiming through or under" was "sufficiently wide to include a wholly owned subsidiary company claiming a right to sell patent articles which it had obtained from and had been ordered to sell [by] its parent".

29 His Honour also referred to Sahab Holdings Pty Ltd v Registrar-General (No 2) [2012] NSWCA 42; 16 BPR 30,353 as authority for the proposition that under s 12A(3) of the Real Property Act 1900 (NSW), "A claims 'through' B if A has acquired title or rights from B, or from someone who has acquired rights from B, and so on through howsoever many intermediary titleholders or holders of rights there might be between A and B" (at [122]). His Honour referred to that conclusion as being unaffected by the decision of the High Court on appeal (Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11; 247 CLR 149).

30 His Honour then said that he proposed to determine the meaning of the relevant expression in the 1970 Agreement "not by reference to authority but by reference to the text and context in which it is used", citing Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; 169 CLR 332 at 342 in support (Judgment [124]).

31 His Honour said that the expression "through or under" (derived from Clause 24(iii) of the 1962 Agreement - see [9] above) clearly went beyond formal succession, assignment or conveyance and concluded as follows:

"126 It is not necessary to determine where the dividing line (if there is one) lies between 'through' and 'under', or to determine the outer reaches of either notion. I consider that derivation of rights 'through' another is sufficiently wide to cover the present case where there is a close practical (even causal) connection between the rights exercised by the Channar Joint Venturers and the rights which MBM obtained from Hanwright under the 1970 Agreement (or actions taken by MBM in exercise of those rights).

127 Such a connection is sufficiently disclosed by the fact that a prerequisite for the grant on 8 May 1988 by the State to the Channar Joint Venturers of ML 265SA was the surrender by MBM of land including that which was the subject of secs 18 and 19 of ML 252SA.

128 Beyond this, however, it may safely be inferred that MBM's surrender of secs 18 and 19 of ML 252SA and Hamersley Iron's surrender of sec 238 of ML 4SA, both of which were necessary for the grant of ML 265SA, were by arrangement between themselves and the Channar Joint Venturers.

129 Finally, there is historical continuity between the exploration of the area done by MBM and the opportunities which that exploration created, the subsequent application by Hamersley Exploration for TRs 6663H, 6982H and 6983H, Hamersley Iron's later application for ML 4SA and the ultimate surrenders and application which were a step in the process leading to the grant of ML 265SA."

The "in association with" issue

32 The primary judge first noted that MBM accepted that Clause 9 of the 1962 Agreement expanded the operation of Clause 3.1 of the 1970 Agreement to require payment of a royalty by MBM if ore was won by MBM, from the MBM area, "operating in association with others" (at [131]) and then noted:

"132 Channar Investment Nominee has extracted ore as sublessee and agent for the Channar Joint Venturers, who hold their interests in the joint venture via Channar Finance Limited. MBM holds 12.5%, albeit apparently non-beneficially for Hamersley Holdings."

33 His Honour then held that Clause 3.1 in its expanded form was applicable, giving the following reasons:

"134 ... First, if ore is being produced by one party in association with another, it is, by virtue of the association being produced by each party in association with the other. Via their shareholdings, beneficial or otherwise, in the joint venture nominee company, ore is being produced by MBM and the Channar Joint Venturers in association with each other. This is sufficient to attract the operation of cl 9."

The "extension of ore bodies" issue

34 The primary judge held that if, as he found to be the case, the "MBM area" in Clause 3.1 of the 1970 Agreement referred to the physical area covered by the relevant TRs, the extension effected by Clause 1.4 of that Agreement was inapplicable. The basis of this conclusion was that, as a matter of undisputed fact, the relevant extensions of ore bodies are within the areas covered by the TRs identified in the 1970 Agreement. Thus, on the primary judge's construction of the "MBM area", those ore bodies are already within the "MBM area" and there is no occasion to consider whether that area has been extended. This conclusion was not disputed on appeal.

35 The only point that was in issue on appeal was the position that would obtain if the "MBM area" was properly understood as referring to the rights of occupation in respect of the TRs, rather than the physical area covered by the TRs. The primary judge held that on this hypothesis, that is, that Hanwright had failed on "the MBM area" issue, Clause 1.4 would have operated to nevertheless entitle Hanwright to succeed on their claim (at [169]). MBM disputed this conclusion.

RELEVANT PRINCIPLES OF LAW

36 It is sufficient to refer to the following recent statement of the principles applicable to the construction of a commercial agreement such as the 1970 Agreement by four members of the High Court in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447 at [35]:

"Both [parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'" (footnotes omitted).

37 The present appeal does not involve any disputed reference by any of the parties to surrounding circumstances that would require this Court to determine what, if any, precedential authority is to be attributed to the observations of three members of the High Court on the application for special leave to appeal in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; 86 ALJR 1. In that case, Gummow, Heydon and Bell JJ indicated that, in accordance with Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 at 352, evidence of surrounding circumstances is only admissible to assist in the interpretation of a contract if the contract's language is ambiguous or susceptible of more than one meaning (compare Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [19] and following, examining High Court decisions subsequent to Codelfa). The recent statement of the plurality in Electricity Generation Corporation, which I have quoted above, does not mention the need for ambiguity before recourse can be had to surrounding circumstances.

38 The issue is the subject of the recent decision of this Court in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 at [69] to [86], where Leeming JA (with whom Ward and Emmett JJA agreed) concluded that there is no inconsistency between decisions such as Franklins v Metcash and that in Codelfa because it is implicit in the latter that to determine whether a contractual expression is ambiguous, regard must be had to context (otherwise referred to as "surrounding circumstances") (at [78]-[81]; see also Newey v Westpac Banking Corporation [2014] NSWCA 319 at [86]-[89]). The essential point made by Codelfa is then that, once it has been determined that an expression is unambiguous, evidence of surrounding circumstances cannot be used to contradict its plain meaning.

39 As MBM's case on construction is founded upon the definition of the "MBM area" contained in Clause 2.2 of the 1970 Agreement, it is pertinent to refer to the following observations of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [17] concerning definitional provisions in contracts:

"17. The judge declined to regard the terms total land value and minimum guaranteed residential unit value as indicative of an intention that MGRUV was to be the minimum Chartbrook would receive as the land value of a flat because both terms were defined expressions. They might just as well have been algebraic symbols. Indeed they might, and I strongly suspect that if they had been, they would have made it clear that the parties were intending to give effect to Persimmon's construction. But the contract does not use algebraic symbols. It uses labels. The words used as labels are seldom arbitrary. They are usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition. In such cases the language of the defined expression may help to elucidate ambiguities in the definition or other parts of the agreement: compare Birmingham City Council v Walker [2007] 2 AC 262, 268 ... "

See also Streller v Albury City Council [2013] NSWCA 348; Aust Torts Reports 82-146 at [43] per Meagher JA (with Ward JA agreeing); Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 at [159] per McColl JA (with Beazley P agreeing); and Lewison and Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) at [5.11].

RESOLUTION OF THE APPEAL

THE "MBM AREA" ISSUE

40 In its written submissions on appeal, MBM defined the issue for determination as follows:

"On their proper construction, do the words '[o]re won by MBM

from the MBM area' in cl 3.1 extend only to ore won from, or in the exercise of, the rights MBM acquired under the 1970 Agreement in relation to the land the subject of the MBM TRs, or rights deriving therefrom? Or do they extend to ore won from any of the land which was once the subject of the MBM TRs, regardless of the source or derivation of the rights to win that ore?" ([42]).

41 Clause 2.2 of the 1970 Agreement (see [13] above) defines the "MBM area" by reference to identified Temporary Reserves. It does this after referring to the division of Hanwright's "Mount Bruce Temporary Reserves", that expression being itself earlier defined in Clause 1.1.

42 Clause 1.1 first refers to Hanwright holding Temporary Reserves in respect of areas indicated on the attached map. The reference to Temporary Reserves must be a loose, although not uncommon, reference to rights of occupancy granted under s 276 of the Mining Act in respect of Crown land reserved by the Minister under that section. Clause 1.1 proceeds to refer to the areas indicated on the attached map as "these blocks" which are in turn defined as the "Mount Bruce Temporary Reserves". As the "blocks" are areas of land, the "Mount Bruce Temporary Reserves" must also be that. In this case the expression defined ("these blocks") sheds light on the meaning of the definition provided ("the Mount Bruce Temporary Reserves"). Clearly the latter expression was therefore intended to refer to areas of land which were identified in two ways: by being marked on the attached map, and by being the subject of Temporary Reserves 4937H to 4967H.

43 Clause 1.4, which provides that "[a]ll references to blocks or reserves include all present and future rights of Hanwright in relation to the above blocks and reserves ... ", does not detract from this conclusion. It is consistent with the "blocks", and therefore the expression "Mount Bruce Temporary Reserves", remaining primarily as defined in Clause 1.1. It expands the meaning of that expression to include rights but does not change its primary signification of the relevant areas of land.

44 By expanding the expression to include rights, Clause 1.4 assumes the continued relevance of the earlier definition of the expression as a reference to areas of land. Clause 1.4's use of the words "located therein" with reference to ore bodies located in blocks or reserves supports this view.

45 It follows that when the parties referred in Clause 2.2 to the division of the Mount Bruce Temporary Reserves, they were again referring to areas of land and not, or at least not exclusively, to rights in respect thereof. It also follows that in identifying part of the Mount Bruce Temporary Reserves as constituting the "MBM area", they were again referring to areas of land.

46 This conclusion is confirmed by the use twice in Clause 2.2 of the expression "the entire rights thereto". That expression indicates what was to be retained by (or, as the clause says, "restored to") Hanwright and acquired by MBM. What the parties divided were thus rights of occupation of the Temporary Reserves. They were rights that related to identified areas of land (the "Hanwright area" and the "MBM area"). When the parties came in Clause 3 to specify the royalty that should be paid, they chose to define the ore by reference to which the royalty was payable by its winning from the "MBM area" rather than its winning by exercise of the rights referred to in Clause 2.2, or rights derived from them. References to land and rights were references to two distinct concepts of which Clause 2.2 makes it plain that the parties were conscious. When specifying in Clause 3 the royalty to be paid, the parties chose to refer to the former concept rather than the latter. It does not matter that, by reason of Clause 1.4, "MBM area" included a reference to rights. What is important for this case is that it included a reference to the relevant areas of land. The Clause 3 royalties were thus payable if ore was won from those areas by MBM.

47 Support for this reasoning is also obtained from the parties' choice of the words "MBM area". In their ordinary meaning, the words refer to an area of land rather than rights with respect to that land. As Lord Hoffmann said in the Chartbrook case (see [39] above), when parties define terms, they seldom use arbitrary labels: "[t]hey are usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition". To this may be added the fact that it is a more natural use of English to speak of ore "won ... from" an area of land than of ore "won ... from" a right such as a right of occupation or mining lease.

48 Contrary to MBM's submission, I do not consider that the parties' use of the word "royalty" in Clauses 3.1 and 3.2 is determinative of the "MBM area" issue. Whilst that word might, as MBM contended, more naturally have referred to payments in respect of the exercise of rights transferred pursuant to the 1970 Agreement than payments as claimed by Hanwright, its meaning is to be determined by having regard to the context in which it appears. In my view the force of the other factors, to which I have referred, relevant to resolution of the "MBM area" issue is such as to indicate that the word "royalty" was used by the parties in a broader, less technical meaning than as contended by MBM.

49 A review of the remainder of the text of the 1970 Agreement does not point to any different conclusion as to the meaning of the expression "MBM area" in Clause 3.1.

50 Clause 1.4 speaks of rights of Hanwright "in relation to the above blocks and reserves" (see [43] above), thus reflecting the distinction to which I have earlier referred. Clause 6 refers to the "sale of iron ore from the Hanwright area" which is more readily understood as a reference to ore mined from an area of land than from the exercise of a right. Similar comments apply to like expressions in Clauses 6.12 and 9. Moreover, the reference in Clause 12 to the "commencement of mining of the MBM area" makes better sense as a reference to mining of an area of land, than to mining pursuant to rights in respect of an area.

51 Reference to the 1962 Agreement, which the parties accepted was at least in part incorporated by reference into the 1970 Agreement, does not assist MBM. Recital (g) refers both to rights ("the right title and interest of the Vendors ... in respect of the said Temporary Reserves") and to the land itself ("the land comprised therein"). This also reveals a consciousness of the distinct concepts of rights and parcels of land. Clause 1 refers again to the two concepts. Clause 3 of the 1970 Agreement is different because it refers only to one, despite the two having been referred to (for a different purpose) in Clause 2.2 of that agreement.

52 Nor do considerations of commonsense and commerciality assist MBM. Contrary to MBM's submissions, I do not consider that good sense requires the 1970 Agreement to be construed so that that which was transferred matched that which gave rise to royalty payments. MBM submitted that it would not have made commercial sense for MBM to agree to pay royalties in respect of ore extracted from land pursuant to rights different from, and in no way derived from, rights which it acquired from Hanwright under the 1970 Agreement. It pointed out that, as in fact happened in respect of Channar (see [18] to [23] above), the acquired TRs might come to an end without leading to the holding by MBM of any other rights in respect of the land to which they related, and some time after, MBM might, for quite independent reasons, acquire mining rights over the land.

53 I do not however see Hanwright's construction as lacking commercial sense. As Hanwright pointed out in submissions, on MBM's construction, it would be relatively easy for it to have avoided paying royalties by ensuring that any mining it did on the land was done pursuant to what MBM described in its submissions as "fresh grants" ([89]). The parties may well have thought that Hanwright's right to royalties would be more secure if it was conditioned upon mining from a particular area of land and did not depend upon what MBM chose to do in relation to the rights of occupation transferred to it under the 1970 Agreement.

THE "THROUGH OR UNDER" ISSUE

54 As noted earlier, the parties accepted that, whilst Clause 3.1 of the 1970 Agreement stated that royalties were only payable by MBM on ore "won" by MBM from the "MBM area", the incorporation of Clause 24(iii) of the 1962 Agreement into the 1970 Agreement rendered the royalties also payable if ore was won from the "MBM area" by a person who derived "title" to the relevant land "through or under" MBM (see [9] above).

55 As Brennan and Dawson JJ observed in Tanning Research Laboratories Inc v O'Brien at 342, in a passage applied by the primary judge, the meaning of a phrase such as that in question here "must be ascertained not by reference to authority but by reference to the text and context" of the instrument in which it is used. Nevertheless it is of some assistance to refer, as did the primary judge, to the observation of this Court in Sahab Holdings Pty Ltd v Registrar-General (No 2) [2012] NSWCA 42 at [28] concerning the phrase "any person claiming through or under that person". The Court stated there that: "A claims 'through' B if A has acquired title or rights from B, or from someone who has acquired rights from B, and so on through howsoever many intermediary title holders or holders of rights there might be between A and B. One is looking at the history through which A's rights have been acquired ... ".

56 On appeal to the High Court (see Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11; 247 CLR 149), the plurality did not comment on this approach, whilst Gageler J expressly agreed with it (at [51]). The approach emphasises the continuity of a chain of title that a reference to a derivation of title "through or under" in my view invokes.

57 The 1962 Agreement's reference to derivation of "title" must be understood in the context of the Mining Act 1904 (WA) which was the applicable legislation at all material times. As noted above at [5], this Act provided for the grant of rights of occupation and the grant of mining leases. Whilst in a strict sense some at least of the interests so granted did not confer "title" to the land, the 1962 Agreement's reference to title should, as a matter of commonsense, be understood as embracing those interests.

58 Furthermore, whilst that Act did not provide for the transfer of such interests, the evidence in this case reveals that transactions equivalent to transfers were able to be effected, with governmental approval, by the cancellation of interests held by the proposed transferor and the re-grant of interests to the proposed transferee. In my view such transactions constituted means by which "title" was "derived" by one non-governmental party from another, in the sense in which those terms were used in the 1970 Agreement.

59 A chain of title such as referred to in [56] above exists vis-à-vis the parts of ML 265SA in respect of which MBM concedes an obligation to pay royalties (that is, Channar B) (see [23] above), as MBM surrendered sections 18 and 19 of its ML 252SA to enable ML 265SA to be granted to the Channar Joint Venturers on 8 May 1988. The latter can thus be regarded as having in substance acquired "title" to the relevant land directly from MBM, thereby attracting the expression in Clause 24(iii) of the 1962 Agreement concerning derivation of title.

60 No such unbroken chain of "title" exists in respect of the balance of the land (Channar A) as the Joint Venturers' rights in respect of this land derive from Hamersley Exploration's acquisition of rights of occupancy in 1978 and 1979 and cannot be traced back to any "title" of MBM to the land.

61 Working backwards in time, the position concerning "title" to Channar A is as follows:

• The land forms part of ML 265SA but it did not fall within sections 18 or 19 of ML 252SA which were surrendered to enable the grant of ML 265SA to the Channar Joint Venturers. Rather, it was formerly part of section 238 of ML 4SA which HI (Hamersley Iron) surrendered to enable the grant of ML 265SA.
• TRs 6663H, 6982H and 6983H held by Hamersley Exploration had been cancelled on 18 December 1982 to enable the grant of section 238 of ML 4SA to HI.
• Hamersley Exploration had obtained grants of TRs 6982H and 6983H on 2 May 1979 and of TR 6663H on 21 April 1978. These covered parts of the earlier TRs 4965H and 4966H held by MBM after the implementation of the 1970 Agreement but those TRs had been cancelled on 17 October 1974, some years before the grants to Hamersley Exploration.

62 Subject to one possible qualification, from 17 October 1974 to 21 April 1978 no mining rights existed over the land to which TRs 6663H, 6982H and 6983H acquired by Hamersley Exploration in 1978 and 1979 related. The possible qualification is that referred to in [20] above: namely, that Dampier Mining Company Ltd may have held some rights over part of the land for about a year from 25 February 1977. This possible qualification is not of significance and can be disregarded.

63 The result is that there was no unbroken chain of "title" over Channar A linking the present owners, who are winning ore from it, to MBM. From 1974 to 1978 no relevant mining rights covered the area and it was not suggested on the appeal that Hamersley Exploration's acquisition of TRs from 1978 was causally related to the cancellation of MBM's TRs in 1974, other than in the sense that that cancellation rendered the land free of any mining rights, leaving it open to the Minister to grant rights to Hamersley Exploration some years later. In other words, the evidence does not indicate that there was any transaction between MBM and Hamersley Exploration that led to the latter acquiring its rights.

The primary judge's reasoning

64 The primary judge commenced his analysis by stating that the Channar Joint Venturers had derived their title from MBM because there was "a close practical (even causal) connection between the rights exercised by the Channar Joint Venturers and the rights which MBM obtained from Hanwright under the 1970 Agreement (or actions taken by MBM in exercise of those rights)" (Judgment [126]).

65 This statement should probably be understood as a summary of the effect of the more detailed reasoning that his Honour proceeded to give. If not, it should not be accepted because, for the reasons I have given in [63] above, the evidence did not establish such "a close practical (even causal) connection".

66 The primary judge then reasoned that the connection was "sufficiently disclosed by the fact that a prerequisite for the grant on 8 May 1988 by the State to the Channar Joint Venturers of ML 265SA was the surrender by MBM of land including that which was the subject of secs 18 and 19 of ML 252SA" ([127]). As already noted, the land presently under consideration (Channar A) did not form part of section 18 or 19 of ML 252SA. The land that did (Channar B) is recognised by MBM to have been acquired by the Channar Joint Venturers from MBM with the result that royalties are payable by MBM in relation to ore won from it. His Honour's point is therefore that, whilst the subject land was not so acquired, the Channar Joint Venturers would not have been able to obtain ML 265SA, which covered that land, if MBM had not surrendered sections 18 and 19 of ML 252SA.

67 Hanwright did not refer on the appeal to any evidence that established that the assumption underlying this proposition was well-founded, the assumption being that the Channar Joint Venturers could not have obtained a lease which excluded sections 18 and 19 of ML 252SA if MBM had not been willing to surrender those sections. However, even if there were such evidence, I do not consider that the conclusion that the Joint Venturers acquired title to the subject land (Channar A) from MBM would be justified. That is, even if the Channar Joint Venturers would not have acquired rights over Channar A but for MBM's surrender of rights over other land, it does not follow that the Joint Venturers derived title to Channar A from MBM. They did not do so because, at the relevant time (1988), MBM did not have any rights over Channar A to pass on to the Joint Venturers.

68 A further reason that the primary judge gave for his finding in favour of Hanwright on this issue was that "it may safely be inferred that MBM's surrender of secs 18 and 19 of ML 252SA and Hamersley Iron's surrender of sec 238 of ML 4SA, both of which were necessary for the grant of ML 265SA, were by arrangement between themselves and the Channar Joint Venturers" (Judgment [128]). I do not however consider that this reasoning supports his Honour's conclusion.

69 As noted earlier, Channar A did not fall within sections 18 or 19 of ML 252SA. Therefore an arrangement whereby MBM surrendered those sections and the Channar Joint Venturers acquired ML 265SA (which did include Channar A) did not result in the latter acquiring Channar A from the former. Similarly, HI's surrender of section 238 of ML 4SA is not of present significance because, although that section did include Channar A, HI was not MBM and had not, directly or indirectly, acquired its title to that mining lease from MBM.

70 Finally, the primary judge concluded that "there is historical continuity between the exploration of the area done by MBM and the opportunities which that exploration created ... " (Judgment [129]). Even if such "historical continuity" existed (which is by no means clear), it did not demonstrate that the Channar Joint Venturers derived their title to Channar A from MBM. The reference in the 1962 Agreement to derivation of title is in my view a reference to the acquisition by the present owner of mining rights over the subject land (the Channar Joint Venturers) of those rights, directly or indirectly, from MBM. The fact that MBM's exploration of Channar A, or of the area generally, might have excited the Joint Venturers' interest in acquiring mining rights in respect of the subject land does not mean that they acquired them, or "derived" them, from MBM. They acquired them from HI which in turn acquired them from Hamersley Exploration. Because there were no mining rights subsisting over the subject land when Hamersley Exploration acquired its rights in 1978 and 1979, that company is properly regarded as having acquired its rights from the Government and not from any private entity such as MBM.

THE "IN ASSOCIATION WITH" ISSUE

71 I have rejected above Hanwright's first contention as to why the condition for payment of the royalty (that is, that ore be "won by MBM") was satisfied, namely, that it was, and is being, won by a person (the Channar Joint Venturers) who derived title to the subject land "through or under" MBM. Hanwright's alternative contention is that the ore was, and is being, "won by MBM" because, in the extending words of Clause 9 of the 1962 Agreement, it was, and is being, won (or "produced") by MBM "in association with" others. That expression appears in that clause in the phrase "all iron ore produced by the Purchaser (whether operating alone or in association with or by licence to others)" (see [9] above).

72 This issue must be considered by reference to different time periods as the arrangements for the production of ore from Channar changed over time (see [24] above).

73 First, from 1988 to 2012 the Channar Joint Venturers sublet the land to which ML 265SA relates to Channar Investment Nominee Pty Ltd ("CIN") which until 2010 acted as nominee for and agent of a partnership, the members of which did not include MBM. Since 2006 CIN has been a wholly owned subsidiary of Channar Finance Limited ("CFL") in which MBM has a 12.5% shareholding, held on trust for Hamersley Holdings.

74 Ore won from Channar in the period to 2012 was clearly not "won by MBM" operating alone, nor in my view was it "won by MBM ... in association with ... others", even since the 2006 shareholding changes. The words "in association with" expand the operation of the expression "produced by the Purchaser". They do not remove the requirement that in some way the ore be produced by "the Purchaser" (as the word applies in this case, MBM). There was discussion on the appeal as to whether the words "in association with" were governed by the words "operating alone". However it does not in my view matter if they are because the meaning is the same whether the clause is read as referring to iron ore "produced by the Purchaser ... in association with ... others" or to iron ore "produced by the Purchaser whether operating alone or operating in association with ... others".

75 MBM was not a member of the partnership which produced iron ore in the first period, nor was it involved in the management or organisation of that production process. It simply held, from 2006, a limited shareholding (12.5%) in the parent company of the nominee/agent of the partnership. Even if the nominee/agent, which was involved in production not on its own account but on behalf of the partnership, could be described as having itself produced any ore, a small shareholder in the parent of the nominee/agent, particularly one holding its shares on trust for another, could not in my view be so described.

76 I do not consider that the extension by Clause 9 of the concept of production by "the Purchaser" to production under a "licence to others" is of significance. This provision does seem to me to be a real extension of the concept of production by "the Purchaser", because it would not be a natural use of language to refer to a company producing ore, or any other product, if the only production were by a licensee of the company. That conclusion does not however assist Hanwright in relation to the construction of the words "in association with" as in my view those words clearly leave intact the requirement for production by "the Purchaser" in the ordinary sense of those words, that is, as requiring some production by "the Purchaser" itself.

The primary judge's reasoning

77 As noted above, the primary judge found that the expression "in association with" was applicable, holding that "if ore is being produced by one party in association with another, it is, by virtue of the association being produced by each party in association with the other. Via their shareholdings, beneficial or otherwise, in the joint venture nominee company, ore is being produced by MBM and the Channar Joint Venturers in association with each other" (Judgment [134]).

78 His Honour's reasoning was that because the Channar Joint Venturers (or in fact, for most of the first period, the partnership members) were producing ore and MBM was associated with them (by having a 12.5% non-beneficial holding in the parent company of the nominee/agent of the partnership), MBM was to be regarded as itself producing ore.

79 Whilst this connection could be regarded as some type of association between the Joint Venturers and MBM, albeit of a tenuous kind, the existence of that association did not in my view require the conclusion that MBM itself produced ore. Persons associated in business are not necessarily to be regarded as each doing what their associates are doing in the course of the business. For example, a bank financing a manufacturing venture is, in a broad sense, associated with the manufacturer but is not, for that reason alone, itself manufacturing goods. Further, a person with a limited shareholding in a manufacturing company is not by reason of the holding alone to be regarded as itself manufacturing the goods manufactured by the company, notwithstanding that in a broad sense the person and the company might be said to be associated. The position might be different where the shareholding is significant and the company is in effect a quasi-partnership, but the present position is far removed from such a case. The present position involved a non-beneficial, 12.5% shareholding and one not in the partners themselves but in their agent/nominee's parent.

80 The primary judge did not address the period since the Joint Venturers commenced ore extraction in place of the partnership in 2012. Hanwright submitted that MBM has been winning ore in this period because "MBM and the company actually doing the mining in the Channar area are both part of the same corporate group engaged in iron ore mining operations in the Pilbara" (submissions dated 20 November 2013, [68]).

81 Acceptance of this submission would require references in the 1970 Agreement to MBM to include references to the other companies in the corporate group of which it forms part. No good reason was advanced or, so far as I can see, exists for giving the word MBM other than its natural meaning.

82 The association contemplated by Clause 9 of the 1962 Agreement was one under which MBM would be producing ore (albeit that it might not be doing so on its own). Such association as existed here was not of that character. Moreover, the fact, if it be that, that CIN was or is the manager of the Joint Venture would not indicate that it, or any of its direct or indirect shareholders such as MBM, was itself producing ore.

83 Hanwright accordingly fail on the "in association with" issue.

THE "EXTENSION OF ORE BODIES" ISSUE

84 As this issue does not arise if the "MBM area" issue is resolved in favour of Hanwright (as it has been) and this further issue received little attention on appeal, it is not appropriate to embark on a consideration of it.

CONCLUSION AND ORDERS

85 As Hanwright have succeeded on the "MBM area" issue, they succeed in their claim in relation to Eastern Range. In order to succeed in relation to the Channar area claim, it was necessary for Hanwright to succeed not only on the "MBM area" issue but also on at least one of issues two and three (the "through or under" issue and the "in association with" issue). As they have not done this, Hanwright fail on their Channar claim.

86 In these circumstances, I propose that the Court order that the parties bring in proposed short minutes of order to give effect to these reasons for judgment, with supporting submissions, in accordance with the following timetable:

(1) The appellant within 14 days of the date of this judgment;

(2) The respondents within a further 14 days;

(3) Any reply by the appellant within a further 14 days.

87 MEAGHER JA: I have had the advantage of reading in draft the judgment of Macfarlan JA. I agree with his Honour's conclusions in relation to the three issues which arise and with his reasons for those conclusions. I add the following observations in relation to the first of those issues (the "MBM area" issue). I also agree with the orders his Honour proposes. In what follows, I have adopted the abbreviations used by Macfarlan JA.

88 The subject matter of the parties' dealings were rights to occupy land and prospect for ore in the form those rights took in the 1960s and 1970s, and by reference to what they were understood to confer at that time. Generally, rights of temporary occupation were granted for mineral exploration purposes pursuant to an agreement between the State and the grantee. That agreement was then approved by an Act of Parliament. The rights of temporary occupation were granted in respect of Crown land which had been reserved from occupation under s 276 of the Mining Act 1904 (WA). Those areas or blocks of land were described as temporary reserves and identified by block numbers.

89 The events leading to the making of the 1970 Agreement are summarised by Macfarlan JA. By the January 1968 Agreement, Hanwright and HI had agreed to form a company to be known as MBM which was to be owned as to 25 per cent by Hanwright and 75 per cent by HI. That company was to prospect for and mine ore from the areas around Mount Bruce in the Pilbara that were the subject of the 1967 Hanwright State Agreement. Under the January 1968 Agreement, HI was entitled at its option to have those reserves, described as the Mount Bruce Reserves, transferred to MBM. They included "all present and future rights of Hanwright in relation to the above blocks and reserves including any extensions of the ore bodies located therein or any adjustments of the present indicated boundaries of the above Temporary Reserves arranged with the Government". The temporary reserves to which Hanwright was entitled were in March 1968 identified as block numbers 4594H-4627H. In October 1969 the rights in respect of those reserves were cancelled and rights to occupy and prospect were granted in respect of temporary reserves identified as block numbers 4937H to 4967H.

90 It was in this context that the 1970 Agreement addressed three principal matters. First, HI relinquished the option it had under the January 1968 Agreement. The temporary reserves in relation to which Hanwright held exploration rights (block numbers 4937H to 4967H) are described in the 1970 Agreement as the Mount Bruce Temporary Reserves.

91 Secondly, the 1970 Agreement provided for the division of the Mount Bruce Temporary Reserves between Hanwright and MBM. The "entire rights" to block numbers 4937H to 4946H and 4963H to 4967H were to be "acquired" by MBM and the "entire rights" to the remaining blocks numbered 4947H to 4962H were to be "restored" to Hanwright. The apparent consideration for that acquisition was the relinquishment by HI of its option (cl 2.1), the payment by MBM of a base royalty of 2½ per cent (cl 3.1) and the payment of a further royalty by MBM limited in amount to A$5m (cl 3.2).

92 Thirdly, Hanwright was granted an option to sell to HI iron ore "from the Hanwright area" (cl 6). In addition to these matters, there were limited arrangements made as to the use by one party of transport and other infrastructure facilities which were to be constructed by the other in the Pilbara area (cll 7, 8).

93 In relation to the "MBM area" issue, MBM contends that as defined in cl 2.2 "MBM area" refers to and includes the "present and future rights of Hanwright in relation to temporary reserves 4937H to 4946H and 4963H to 4967H, including rights to any extensions or adjustments". That is said to be the result of a "careful contextual reading of cll 1.1, 1.4, 2.2 and 3.1 of the 1970 Agreement".

94 MBM submits that in accordance with the opening words of cl 1.4, all references to "reserves" in cl 2.2 are to be read as including "all present and future rights of Hanwright". It follows, it is said, that the defined expressions "Hanwright area" and "MBM area" refer to and include the present and future rights in relation to the reserves which the relevant block numbers identify.

95 There is a distinction between the rights to occupy and prospect granted in respect of a temporary reserve and the reserved area or block which is the subject of those rights. The opening words of cl 1.4, to some extent, blur that distinction. However, the language which the parties have used makes clear when it is that they are intending to refer only to the areas or blocks. That language shows that what the parties by cl 2.2 agreed to divide were Hanwright's rights in respect of the Mount Bruce Temporary Reserves and that they did so by agreeing that the rights in respect of a part of the area of those reserves should be held by MBM and that those in respect of the remaining area should be held by Hanwright.

96 In cl 1.1, "blocks" where first used describes areas of land which are the reserves the subject of rights granted to Hanwright. Those "blocks" together are referred to as the Mount Bruce Temporary Reserves and described as being subject to the exercise of an option by MBM. The reference to the option is to the right given to HI by cl 4 in Part D of the 1968 Agreement which was to have "the blocks mentioned in the Preamble above ... transferred to MBM". The Preamble provided (as is noted earlier) that references to "blocks" included "all present and future rights of Hanwright". It may be accepted that this provision, similar in its terms to cl 1.4, creates some uncertainty as to whether the reference to Mount Bruce Temporary Reserves is to be understood as including the exploration rights to which the relevant land areas or reserves are subject. That uncertainty does not, however, affect the meaning to be given to "MBM area" in cl 2.2.

97 In cl 1.4 the context makes clear that the expression "blocks and reserves" refers to the land areas identified by the relevant block numbers and does not include the rights to which those blocks or reserves are subject. That is because the "present and future rights" are said to be in relation to those "blocks and reserves" which are described as including the "ore bodies located therein".

98 At the time they made their agreement the parties must be taken to have contemplated that, as had occurred between the making of the 1967 Hanwright State Agreement and the making of the 1970 Agreement, the boundaries to temporary reserves might be adjusted or the rights in relation to particular areas cancelled and new rights granted, either by reference to the same or different block numbers identifying the same or differently defined areas.

99 Also, it was not contemplated that the division agreed to by cl 2.2 would happen immediately. That clause records an agreement that the Mount Bruce Temporary Reserves "should be divided". For that to occur would have required the agreement and involvement of the executive and legislative arms of government. It was, for that reason, necessary to make clear that the subject matter of the division was not limited to the rights held in respect of the identified reserves at the time of the 1970 Agreement.

100 Clause 2.2 maintains the distinction between rights and the areas in respect of which those rights are held. It provides that the Mount Bruce Temporary Reserves should be divided so that in respect of the reserves (meaning areas) identified by particular block numbers "MBM acquires the entire rights thereto". The reference to the "entire rights" is to be understood in accordance with cl 1.4 and as being to all present and future rights in respect of those reserves or areas. Thus, the subject matter of the division is those present and future rights with respect to particular areas which are described as the "Hanwright area" and "MBM area".

101 This construction of these expressions is consistent with the other provisions of the 1970 Agreement. The shorthand expressions "Hanwright area" and "MBM area" are also used in cll 6, 6.12, 9 and 12. In those provisions, the references are to "sale of iron ore from", the acceptance of "ore from", "ore mined from" and "mining of", in each case, the relevant area. Also, the references in cll 3.1 and 3.2 to ore being "won" by MBM from the "MBM area" are consistent with its being the physical area from which the ore is obtained.

102 More significantly, cl 3.1 provides that the royalty obligation is to be "on the same conditions as apply" to the 1962 Agreement. In that agreement, the obligation was to pay 2½ per cent of the amount received on the sale or disposal of iron ore produced "from the Temporary Reserve land" (cl 9). Recital (g) of that agreement draws a distinction between the rights in or in respect of the temporary reserves and the land comprising those reserves. Contrary to MBM's submission, it is only the latter which is defined as the "Temporary Reserve land". The 1962 Agreement contains provisions addressing the circumstance that the party liable to pay the royalty (under that agreement, the Purchaser) has sold or assigned or otherwise disposed of its interest in the Temporary Reserve land. Those provisions as to sale or disposal are described as applying to "any areas of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to Clause 9" (cll 19, 24(3)). These provisions are incorporated into the 1970 Agreement and are consistent with the language of cll 3.1 and 3.2 understood as attaching the royalty obligation to ore obtained from an area of land as distinct from rights in respect of it.

103 Finally, as Macfarlan JA also observes, parties often use shorthand descriptions in agreements to avoid repetition of much longer forms of expression which would otherwise be necessary to refer to the same subject matter. It is often the case that the shorthand description used is one which the parties have adopted in their common language or which is associated by them with the defined subject matter. As Lord Hoffmann observed in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [17] such shorthand descriptions or labels "are usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition. In such cases the language of the defined expression may help to elucidate ambiguities in the definition or other parts of the agreement." In cl 2.2 the parties described the subject matter of the present and future rights which were to be divided as an area because, as Hanwright contends, they were referring to the areas of land that were the subject of the rights to be divided.

104 BARRETT JA: For the reasons stated by Macfarlan JA and amplified by Meagher JA, the outcome on appeal should be as stated by Macfarlan JA at [85]. The parties should be directed to bring in proposed short minutes as his Honour proposes.

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Decision last updated: 16 September 2014